Earnings Call: Q3 2019

Nov 14, 2019

Ladies and gentlemen, welcome to Bouygues' nine months twenty nineteen Results Conference Call. I now hand over to Karri Gaddon, Head of Bouygues Investor Relations. Please go ahead. Thank you. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.big.com the earnings press release, the presentation we will be commenting on during this conference call and Excel file with historical figures for the group and its business and the company's financial statements. Statements made on this call are forward looking statements. Such statements reflect objectives that are based on management's current expectations or estimates and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward looking statements. I will now turn the call over to Mr. Philippe Marienc, Deputy CEO of Bouygues. Thank you, Karine. Good morning to all of you, and thank you for joining us. I would like to welcome everyone to our conference call to discuss Bouygues' nine months results. With me in the room is Christian Lecourc, CFO of Bouygues Telecom and Pascal Granger, former CFO of Bouygues Construction. As you know, Pascal will replace me as CFO of the Bouygues Group following my retirement at end February twenty twenty. Following my comments, we will be answering your questions. Beginning on slide four, the nine months results are in line with the trends we discussed during the first half announcement. First, the profitability of the group improved year on year driven by the three sectors of activity. Second, the construction businesses delivered a solid performance. The backlog remained at a very high level at end September, and the current operating profit increased. And third, Bouygues Telecom continued to deliver strong commercial and financial performance, thanks to a differentiation strategy focused on reliable and high quality networks as well as a simple and seamless customer experience. In this context, we confirm the full year outlook shared with you in February and confirmed in August. The key figures shown on slide five confirm the increase in the group's results. Group sales of €27,600,000,000 were up 9% in the nine months like for like and at constant exchange rates. Group sales as well as sales in France and international markets were all up 5%. Current operating profit improved in the first nine months of 2019 and was up €216,000,000 compared to the first nine months of 02/2018. This performance was driven by the three sectors of activity as highlighted in the table. First, at Bouygues Telecom, the current operating profit rose by €74,000,000 year on year, thanks to solid and continued top line growth. Second, TF1 delivered €57,000,000 current operating profit increase, which was already discussed during the publication of their nine months results on October 30. And third, the construction activities posted growth of €122,000,000 in current operating profit year on year, boosted by a recovery in Energy and Services, a strong dynamic in Mainland France Road business and a return to breakeven at Colas Rail. Therefore, the year on year group current operating margin reached 4.1% in for the nine months 02/2019. Group operating profit included non current income of €50,000,000 in the first nine months of 02/2019, mainly related to the capital gain on the sale of sites to Cellnex Bouygues Telecom versus non current income of €198,000,000 in the same period of 02/2018. Finally, net profit attributable to the group increased by €77,000,000 from a year ago. It includes Alcom's contribution of €238,000,000 in the first nine months of 02/2019. Of note, this contribution takes into account the net capital gain of €172,000,000 from the disposal of 13% of Alcorn's share capital in the third quarter. These results confirm our ability to meet our 2019 objective of improved profitability at the group level. Let us move down to Slide six to see the net debt evolution from end December twenty eighteen to end September twenty nineteen. On slide six, net debt was €4,600,000,000 at end September twenty nineteen, up €1,000,000,000 compared to end December twenty eighteen. Compared to end September twenty eighteen, net debt was down €800,000,000 This increase over year end is explained by several items. First, an inflow of 1,400,000,000 related to Alstom comprised €1,100,000,000 of proceeds for the September sales of 13% of Alstom's share capital and July's dividend of €341,000,000 Second, an outflow of €165,000,000 in acquisition and disposals coming mainly from the following acquisitions, Kayo and Nerim at Bouygues Telecom in Q1, Dimension and by TF1 in Q2. Please keep in mind that net debt at end September twenty nineteen does not include the acquisition of RealOne by Nguyen at TF1. The third item is the outflow of €710,000,000 for the dividend. And finally, we have an outflow from operations as discussed in the next slide. Turning to the breakdown of operations on slide seven for nine months 2019, you can observe that net cash flow, including lease expenses, grew 109,000,000 year on year, excluding as on dividend of €341,000,000 This increase was led by Bouygues Construction, Colas and TF1. Net CapEx is down EUR 58,000,000 mainly due to Bouygues Telecom as expected, while net CapEx for construction activities is almost stable. As a result, free cash flow generation before working capital requirement has improved by €167,000,000 year on year. Last, working capital requirement increased by roughly €400,000,000 The working capital requirement improvement at Bouygues Immobilier did not offset the deterioration of Bouygues Construction, which is linked to progress of on major projects. By year end, we expect net debt between 2,600,000,000.0 and €2,700,000,000 with an increase in working capital of around €400,000,000 which is the level at end September twenty nineteen. While we do not to offset the increase in working capital that we have experienced so far this year, it is not the result of any structural trend, but rather more of a timing issue. I will now turn to the review of operations starting with the construction businesses. Let's begin with the backlog on Slide 10. At €32,500,000,000 the backlog in the construction businesses at end September two thousand and nineteen remained at a very high level. As you can see on the chart, it is the second highest level of activity in the past three year six years. Despite a decline of 4% in the overall backlog at end September twenty nineteen compared to the same period last year, the commercial momentum of both Colas and Bouygues Construction remains good as you will see in the following slides. Let us now turn to France as illustrated on Slide 11. In France, the backlog at end September twenty nineteen reached €14,000,000,000 a slight decline compared to last year at constant exchange rates and excluding major acquisitions and disposals. At Colas, the backlog was up 7% over the previous year boosted by an 8% growth from roads in Mainland France. At €8,500,000,000 at end September two thousand and nineteen, Bouygues Construction's backlog was slightly down compared to the same period last year. Significant contracts were booked in Q3 twenty nineteen, including the harbor expansion of Port La Nouvelle in Southern France for €199,000,000 Important tenders are expected in 2020 related to Grand Paris Express. As anticipated, the backlog at Bouygues Immobilier was down 11% compared to last year due to the absence of commercial property order intakes in the first nine months 2019 as well as a decline in the French residential property reservations in a slightly contracting housing market. This slowdown in French residential market could continue in the 2020 within the context of local elections in the spring. Let us now move to international markets. International markets are dynamic, especially in countries where the group has a long standing presence. In this environment, as shown on slide 12, the backlog at end September twenty nineteen remains unchanged at a high level of €18,500,000,000 Orders for the quarter notably include two major contracts, the construction by Bouygues Construction of a 4.4 kilometer tunnel in Hong Kong for €364,000,000 and the construction by Colas of a taxiway at the Los Angeles International Airport for €75,000,000 Some significant orders are expected in Q4 twenty nineteen and in 2020 at both Scolas and Bouygues Construction as evidenced by today's announcement of €756,000,000 contract at Bouygues Construction for the design and excavation of an undersea tunnel in Hong Kong. Overall, the share of order book in international markets rose from fifty nine percent one year ago to 61%. Let's now move to the nine months results of the Construction businesses. Turning to Slide 13. Sales were up 9% in the nine months 2019 and up 4% like for like and at constant exchange rates, demonstrating dynamic activity at Colas and Bouygues Construction. The construction businesses' current operating profit increased by €122,000,000 in the first nine months of twenty nineteen compared to the first nine months of twenty eighteen. Current operating margin was up 0.4 points over the same period. Several factors led to this increase. At Bouygues Construction, the rise year on year in current operating profit was driven by a recovery in Energy and Services following difficulties in the completion of three projects in Q3 twenty eighteen. As highlighted, Energy and Services' current operating profit was positive at €51,000,000 in the first nine months 2019 compared to a loss of €139,000,000 in the first nine months 2018. Energy and Services Diamond's current operating margin reached 1.8%, while building and civil works delivered a 3.2 margin. At Colas, current operating profit increased by €59,000,000 over the same period. Excluding this year's negative contribution of $20,228,000,000 euros from Miller McAsphalt in January and February, Colas' current operating profit was up €87,000,000 year on year, reflected a strong improvement. As a reminder, the results of Miller McAsphalt in January and February were not consolidated last year. The €87,000,000 increase was driven by solid momentum in the roads business in Mainland France and the return to breakeven at Colas Rail, thanks to recovery measures implemented since end twenty eighteen. At 2.2% in the first nine months 2019, Colas' current operating margin was up 0.5 points. And excluding the negative impact from Miller McIntyre, it was up 0.8 points. Last, as previously mentioned, Bouygues Immobilier is experiencing weak activity in commercial property development. Furthermore, in residential, a buoyant French market related to peak reservations in 2017 as strained resources putting pressure on margins. Now let me turn the call over to Christian. Thank you, Chris. Starting with Slide 15, you can observe that our commercial performance remained very strong. We won 501,000 new mobile brand customers, excluding H2M, in the 2019, of which two and twenty thousand were in the third quarter. In FTTH, net adds have accelerated with 286,000 new customers joining us in the 2019, of which 110,000 were in the third quarter alone. FTTH customers represented 20% of the fixed customer base as end September twenty nineteen compared to thirteen percent one year ago. The FTTH customer base at end September twenty nineteen has almost doubled compared to one year ago with 855,000 subscribers. We expect this trend to continue, allowing us to reach 1,000,000 FTTH customers by year end. Overall, at end September twenty nineteen, Bouygues Telecom serviced 11,400,000 mobile plan customers, excluding M2M, and 3,800,000 fixed customers. As shown on Slide 16, Bouygues Telecom delivered solid top line growth in the first nine months 2019. Sales were up 13% year on year and 11% like for like. In line with first half year twenty nineteen, sales for services rose 7% in the quarter, thanks to three factors: first, continued growth in the mobile and fixed customer base second, stability of mobile ABPU at €19.9 for two years and third, a significant 1.1 increase in fixed EBITDA year on year to €26.6 This increase confirms the success of our strategy in the fixed market. EBITDA after leases for the nine months was €1,050,000,000 an increase of 13% year on year. Additionally, EBITDA margin on sales from services was up 1.6 points to 30.9%. At €460,000,000 €65,000,000 operating profit was down €80,000,000 compared to the first nine months of twenty eighteen, reflecting as anticipated, the drop in non current income. Two reasons explain this decline. First, lower number of mobile site disposals with €58,000,000 in nine months 2019 compared to €127,000,000 in nine months 2018. And second, non current income of €110,000,000 booked in Q3 twenty eighteen related to the cancellation of 1,800 megahertz financing charges accounted for full year 2018. Gross CapEx at €734,000,000 in the first nine months 2019 are down €186,000,000 year on year, in line with expectations for 2019. Free cash flow before working capital requirements improved by €27,000,000 to $2.00 €5,000,000 in the first nine months 2019. Please keep in mind that in the first nine months 2019, Bouygues Telecom has already paid €144,000,000 of income tax versus €82,000,000 in the first nine months 2018. Since we expect to pay a lower income tax for the full year 2019 related to the decrease in non Q1 income, we paid a smaller tax payment in Q4 than last year. We are therefore confident of reaching our target of free cash flow generation of €300,000,000 by year end at Bouygues Telecom. Moving to Slide 17, you see that for the second consecutive year, ARCEP ranked Bouygues Telecom number one in rural areas and was recognized second on average in France, thanks to the quality of its mobile network. We are proud of its results since we won either number one or number two in all KPIs. Bouygues Telecom's focus on network quality and continued on Far East and future development provide confidence in the mobile network leadership and growth package. Slide 18 highlights that our growth strategy is based upon three main drivers. First, we benefit from an increase of mobile market share in less than areas. Our mobile network chain has resulted in 50% more sites compared to twenty fifteen. And additionally, we are strengthening our local distribution channels with the opening of around 50 stores. The second driver is the growth acceleration in FTTH. At end September twenty nineteen, we have 10,200,000 premises marketed, up 3,900,000 year on year. We are covering 85 French departments and over 3,019 municipalities. Our goal is to market 12,000,000 services by end twenty nineteen and twenty million premises by 2022. The third driver is the B2B market. The acquisitions of Keio and Eurim are strengthening the Bouygues Telecom Enterprises position in both mobile and fixed with the focus on the SME segment. The integration process is ongoing, and we are currently migrating main technical infrastructures to Bouygues Telecom infrastructures. Regarding Kayo, the good news is that we are already benefiting from our first positive commercial synergies. Thank you, Christian. I would like to briefly comment on the financial statements. We have already looked at sales and current operating profit shown on Slide five. Let us now have a look at other income and expenses contributing to operating profit on Slide 20. The EUR €148,000,000 decrease in non current income compared to one year ago and essentially from Bouygues Telecom as explained by Christian. Turning to Slide 21, as you can see that income tax expenses increased by €16,000,000 leading to an effective tax rate of 33% for the nine months the first nine months in 2019. Moving to the associates and joint ventures line. The €34,000,000 positive change is explained mainly by the improvement in results at Ipco, a Colas subsidiary that manufactures and distributes asphalt products in Southeast Asia. Finally, we will turn our attention to the outlook for the full year. As you can read on Slide 23 and as stated at the beginning of this call, we confirm the outlook shared with you in February and confirmed in August. This concludes my presentation. Operator, please open the floor for questions. We have our first question from Nicolas Coulissant from HSBC. Go ahead. Thank you. Hello. First question on telecoms. You posted a significant increase in broadband ARPU this quarter, but the mobile ARPU is still flat though. When do you think we should see the effect of price increases? And looking forward, what's your view on pricing models for five gs in the B2C segment especially? And then a second question for other businesses. New management teams at Colas and Bouygues Immobilier are implementing efficiency plans or optimization plans. You tell us a bit more about this? And whether we should see that as a way to win more contracts or improve margins or both? Nicolas, this is Christian. About your first question about mobile eBPU, which is flat. It's mainly mix effects between low end markets and high end market high end part of the market. We still continue to increase our price either with for our new clients and also for the existing clients. But it takes time to see that in the ABPU. About five gs ABPU, of course, may not disclose in advance our marketing strategy, but I think that our goal as all our competitors is to we will try to get more money to keep some money, thanks to five gs. So regarding Colas and Bouygues Immobilier, at Colas, there is no change because of new management. On in fact, the strategy or some recovery is based mainly on the recovery at Colasseil and the plan was implementing since the beginning of 2019. So no chance. The idea is to come back to a safer situation in Colasseis mainly by reducing the SNCF share of the French activity of Colasseis. We have solved the freight issues at the 2018. So no change. And the idea is obviously to increase the profitability of Colasraille. Regarding the rest of the activity, no particular change because of the change of management. The idea is that launched two years ago now, launched development in Carriers and Aggregates on one side and bitumen strategy on the other hand. But it's not a change because of the management. It's an evolution again since for two years now. So no real change because of new management. Regarding Bouygues Immobilier, clearly, are facing a weak situation in terms of residential, first because of decrease in reservation in 2018 and now in 2019 because of the general environment and mainly because of the municipal election. So we anticipate to have a better situation 2020 with new phases for reservations and permits. That's the first point. So decrease in terms of activity, so lower margin, obviously. And the second issue we have is clearly an increase in terms of costs, building costs because of, again, a nice situation in construction, thanks to the good reservation in 2017. This situation probably will last up to the end of 2020, and we will recover a nicer situation in 2021 because of the decrease in construction in the construction market for residential mainly, again, because of the decrease in reservation in 2018, 2019. So that's the key issue for Bouygues Immobilier, and the new management is facing to this situation and will prepare a series of measures to accelerate the recovery in 2020, and we will discuss that at the beginning of last year next year to explain the various actions we will take into account. Okay. Thank you. So we have another question from Andrew Lee from Goldman Sachs. Please go ahead. Good morning, everyone. I had a couple of questions. One was on telco churn. So you're annualizing your more all the more aggressive promotions from 2018, and it's over a year since the €5 mobile promotions in the market were pretty much removed. Are you seeing any increased churn as customers come off these promotions? And then secondly, just on your mobile service revenue year on year growth, it looks like it slowed a little versus last quarter. Just wondering if you could give us any color on any particular reason for that. Thank you. So about your first question about the churn rate for clients we acquired last year at a very low price, they are still at very low price, in fact, and the price for new clients is higher than what they are paying today. And of course, they are not Your question is about the revenue. The service revenue growth. Yes, sorry. I think that you have to keep in mind that I think that you are expecting the service revenue by multiplying, yes, the total burn multiplied by the ABPU. And then you get only the revenue billed to the clients. Then to go to the service revenue, you have to add or subtract many things. So you have the incoming call and SMS revenue. You have the MVNO revenue. You have the roaming revenue, and you have the IFRS 15 impact. So and all these kind of things are not, I would say, linear or it's very difficult. So you can have some different impact quarter by quarter. That's why it's very difficult to go from the subscribers increase plus the EBTU change to the service revenue percentage increase. Revenue a Hi. Two questions, please. First, in terms of the EBITDA trajectory in Q4 on telecom. So clearly, Q3, the trajectory was a bit slower because, as you pointed out, there were some one offs in Q3 twenty eighteen. But when we look into Q4 twenty nineteen and beyond, should we expect the operating leverage to reaccelerate assuming obviously that the top line continues to grow nicely? Or is there any change in the cost structure that will prevent EBITDA progressing strongly? And then in terms of Colas, when you look at your order book today, how is your expectation for 2020? Because typically, as you flagged in the past, during election years, Colas can be a bit weak, but it seems the order book is actually quite solid in France. So I was wondering what would be the outlook for you for Colas in 2020 in France? So about EBITDA growth from Q3, that's why that I remind you that we had last year the impact of 1,800 megahertz frequencies, which was we had to recognize the minus €8,000,000 in Q1, minus €8,000,000 in Q2 and plus €16,000,000 in Q3. That's why our EBITDA growth, I would say, was better in Q1 and Q2, and it's worse in Q3. If you exclude these elements, you will see that the EBITDA growth is quite stable. So we think that we I won't disclose the Q4 indication, but of course, we expect to see a continued growth in term of EBITDA even if it should be slower than in the past than prior last year, especially because part of our growth is coming from the fixed, so we have more and more fixed costs related to DSL or FTTH, first point. And second point, we are investing in our customer satisfaction program. So that's our main customer experience. That's our main strategic goal for the coming year. So regarding Colas, you're right. We have always decreased in term of order intake following a pre election year, so the during the election year. So probably and surely, we will have the same phenomenon as in the past. Nevertheless, we consider that the impact will be less important than previously because in excess of this pre election year phenomenon, we have clearly another element, which is an increase in our order intake, not because of election year, but because of the status of the French road network. After a very long period from 2012 to 2017, we have seen a decrease because of the local authorities' budget constraints. We have seen a big decrease in terms of budget for maintenance on the road business. So the status of the network is not good. And so in excess of the usual pre election year phenomenon, we see clearly an increase in our backlog because of pure maintenance activity, and we consider that this trend will continue in 2020. So for sure, we will see a decrease, but not so important as the previous previous years. Thank you very much. We have another question. And on top of the and just and and on top of that and on top of that, we have obviously the Grand Paris Express program, leads to have a new category of deals and business coming from this big program. So clearly, are sure that we will continue to have new orders coming from Grand Paris Express because after the tunnel construction, we have to equip the tunnels with rails. So for CarMax Rail, clearly, we see a relatively good twenty twenty year increase because of the company program. So not so bad as previously for Roads and good dynamic for Very clear. Thank you. So we have another question from Mr. Giovanni Montcalty from UBS. Go ahead. Hello. Hi. Thanks for taking my question. It's almost a year you signed the agreement for a partnership with Mirova and Aclion around the deployment of fiber in Benzarius. I was just wondering if you keep you could give us a bit of color on the way this JV is going in terms of rollout, in terms of, I mean, the way financials are working. And also, you may consider eventually extending the JV also to the less dense areas to the rural areas as other players are doing? Thank you. Okay. So we signed with CitiFact, which is a subsidiary of FermiOva at the end of last year, an agreement for deploying 3,400,000 premises in FTTH in the residence area. The deployment is an ongoing process. I don't know exactly where we are, but it should take around three years to quite finish area. It's a very good part of the partnership, and we are very happy to work with Meova and Saxion on these topics. Regarding your other questions about doing other things in the rural areas, I'll just remind you that we do not have any infrastructures at Bouygues Telecom in rural areas because the FTTH network is rolled out by either Orange or SFR in the medium dense and by specialized operators in the public initiative network area. No, no. For sure, I understand that I was, for example, thinking of the JV that we had created with a financial partner to, let's say, help finance the co investments that they have to do exactly with the big operators or with Orange and the Altium and the Midends. Would you consider doing something like that eventually using this vehicle you have created or I don't know joining the one with the drilling forces. I don't know. Just understanding how you we may think about this. Thank you. So, IDIAT scheme is a clever, clever scheme. We are studying the scheme, and we will look what we will do probably next year. So it could be possible for alternative carriers to join Focus. I mean it could make sense for everybody. You would have a larger scale. It would be a diversification of the risk No, definitely, it's a very clever scheme. So we will we will see see in the future if this scheme could could be adapted to us. And definitely, it's it's very clever and and could be useful. So we will think and think about it. Thank you very much. Thank you. So we have another question from Stephane de Maisons from MainFirst. Please go ahead. Thank you. Two questions if I can. The first one is, if I'm looking at the broadband market in the third quarter, what is interesting and shrinking, I would even say, is that all the operators have been growing their broadband base, which is something new because for the past couple of years, there's always there was a loser pretty much every quarter in the past couple of years. So I was just wondering whether you have any view and explanation about that, any view on the overall market or that could help us understanding why everybody is winning now? And my second question is regarding ad deconstruction, sorry, to be more specific, where we are seeing a little bit of pressure there. Obviously, I think it is not including the Hong Kong contract, which are pretty strong. And again, we are still at relatively high historical levels. But I'm just wondering whether you think that possibly you are at sort of the peak levels on your current geographies and whether you think that you may need now to be entering or pushing ahead stronger in new geographies where you haven't been so much, such as Germany, for instance, that could help you perhaps to further expand the activity of Bouygues Construction internationally? So about the fixed market in France, I mentioned just that the market is a growing market by more than 500,000 more households each year. So that's why that sometimes someone is doing using some customers and some other is gaining more customers. But it's a growing market, more than 5,000,000 per That's all? Yes. Okay. So regarding the backlog of Bouygues Construction, clearly, backlog of Bouygues Construction is not under pressure. And clearly, our strategy and we said that for years, our strategy is not a growing strategy at any price, but clearly a selective approach on a project by project basis to be sure that we increase our margin, which is our key target. Our target is not to increase by any means our backlog. So we are not under pressure. We consider that we have sufficient opportunities in front of us to be selective and it's exactly what we have done in 2019. As you have mentioned, backlog in construction is always very difficult to compare one day to another because the day after, you can have a new contract. So what is important is general plan. The general plan remains very solid because, as we explained last year in October, in September, the construction landscape for us is a nice one in terms of opportunities, mainly in the mature countries in which we have a footprint. So the idea is not accept very specific opportunity, but the idea is not to enter massively into a new country because, again, in the countries in what in which we have a good footprint, the opportunities are there. So clearly, we will continue to develop our activity in sophisticated contracts based on project with sophisticated solution in term of low energy consumption, in term of smart cities, in term of sophisticated infrastructure, exactly what we have done in the recent past. And for us, the market remains good. And again, it's sufficiently good to be selective to be sure that we will be able to deliver a good margin in the coming years. That is our key target. And the target is not to increase the gain at any price, at any condition, the volume of our activity. So we have absolutely no fear about our backlog in construction because of the good trend, generally speaking, in term of stimulus plans for infrastructure as we have in France, for instance, or in England or in Eastern Europe or in Australia and other countries. So no big change, no new geographical areas except opportunities based on specific project. But again, the situation for us remains good because of a lot of opportunities leading to have a great selectivity on projects. All right. Thank you. So we have another question from Alexandre Renci from Exane. Please go ahead. Hi. Thanks for taking the question. Can you give us some more color on the benefits you would see from the upcoming IMO 2020 regulation? And more specifically, how this should affect your different business line, both from the revenue side for Neuromassacfa? As I understand, there's worry in the market that asphalt contract pricing could see pressure. Whilst you might benefit on the cost side for the construction activity, What kind of net benefit could we see on margin in the coming years? And then secondly, capital has been coming more of a drag than expected, I think, for the first nine months. How confident are you that you can normalize working capital level in light of your 2020 free cash flow guidance? Thanks. So regarding IMO 2020, for us, clearly, it's Colas is the first buyer of bitumen in the world, first. And second, we have already two big geographical platform to distribute to store and distribute bitumen in North America, thanks to Milano Castal and in Southeast Asia, thanks to TIBCO. We consider that it's an opportunity for us to increase this activity of storage and distribution of bitumen. The idea is the creation of a third platform in Europe, starting with a French facility. So clearly for us, it's an opportunity to increase this good activity because as you have seen with ICO on one side, our Miller McAsphalt, this activity has a higher margin than the average Colas margin. So for us, definitely, it's an opportunity to increase our margin in the future, again, based on the two existing platforms, first and second, by the opportunity to create a third platform in Europe. Regarding working cap 2020, so clearly, as usual, it's not always very, very easy in on the construction side to monitor precisely the working cap the working cap requirement. Clearly, for 2019, we will not be able to reach our target, which was zero variation in working cap requirement, and we will be more in the range, as I have said, in around EUR 400,000,000, mainly due to Bouygues Construction timing effect. We will take some measures to improve that. And the idea is to have sufficient headroom on further the other activities or on the regular Bouygues Construction activities to mitigate, obviously, variation variation by structure in Bouygues Construction because one contract at the end of the year with big advance payment, obviously, improved dramatically the working cap requirements one year and not the year after or not the year before. So clearly, the idea is to create headroom from other activities in the Bouygues Group and in the regular activity, the bread and butter activity of Bouygues Construction to be able to mitigate this variation we have in we have always in the building and civil work activity. It will be the way to secularize the idea of the €1,000,000,000 free cash flow generation after working cap within the coming two years. Very clear. Thank you. So we have another question from Frederic Boulan from Bank of America. Go ahead. Hi. Thanks for taking the question. So first of all, it was really a similar question on the free cash flow generation and the working cap. So I think last year was also EUR 400,000,000 negative working cap, year before a bit more. So it's turning into the trend, it wasn't like that before. So if you can extrapolate a bit more on what's driving this. You talked about timing of contract, but shouldn't we have over the medium to long term zero number or so we should have inflows over time? And specifically, on the big outflow this year, is it something that if it's a timing issue that is bound to one at one point? Or it's something that we shouldn't really expect medium term. And so and a follow-up on the free cash flow point. So you mentioned on your starting comment that you got the EUR 2,000,000,000 inflow from outcome. That was still on dividend. So if you can share with us at the light of your €1,000,000,000 target for next year, how the fact that you have just proceed, plus the fact that you expect a significant growth in free cash flow will drive your policy in terms of return? And then certainly, if I may, just a follow-up on the previous question on service revenue dynamics. So I understand there are some differences between ARPU and subs and service revenue. But service revenue went from 8.5% last quarter to 6.6%. ARPU seems to be improving in fixed and improving in mobile. So if you can explain a little bit what we could expect going forward, if there is some seasonality or one offs or technicals in Q2 or Q3? Q2 was very strong. Maybe Q2 was an outlier. And what we can reasonably expect for the coming quarters? Thank you. So regarding your first set of questions. Regarding our dividend policy, there is no change. And the use of the proceeds coming from Alstom, there is also no change compared to my previous comments. So we will use the cash by order to develop our existing businesses second, to monitor our net debt and third, to see if there is possible and at which level return to shareholders. The final decision will be taken at the beginning of next year. So we will discuss that precisely in February 2020. Regarding but with no change on the new view. If we are able to increase the dividend, obviously, we will do that. And you are right, if we have a target to increase our free cash flow after net working cap requirement. Obviously, it will lead to increase the dividend distribution. Regarding the the working cap, you're right. We we we have seen a deterioration in our working cap in the in the previous years mainly, and we commented that previously, mainly in the next in the last two years because of very specific reason except the timing of projects in Bouygues Construction, mainly an increase in the inventories in Colas because of the Miller McEacht's arrival, first. And second, negative working cap in Bouygues Immobilier because of our positioning on big development in neighborhood areas with the acquisition of land before to launch a very long operation. We consider that now we are entering into a more regular reason. So with no more change on that because now we have this type of operation regularly, but there is no big change coming from the previous situation. So it is the reason why we continue to to to to think that in the future, we will more or less around zero in terms of working cap variation with a range of variation because of pure timing effects in big contracts. So about the telecom service revenues in the mobile, I think your question was in the mobile. So the main difference, as I said before, between revenue built to the client and the mobile service revenue is, of course, incoming call of SMS revenue, IFRS 16 and roaming revenues and MVNO revenues. MVNO revenues, especially now, is at lower than the last year because many of the pressures that the European Commission took on the tariffs. On the other side, of course, we have less cost on this point. And MPDO about MPDO revenues, we the MPDO revenues is not recognized exactly on a linear basis. It's depending on negotiation we can have with our partners on this point. And so we can have some good news, some quarter, bad news, some others. That's why you can see difference. You can very difficult to go from the new subscriber base directly to the service revenues. Okay. So we have another question from Eric Le Maria from Brian Garnett. Go ahead. Hi. Thanks. Two questions, please. Firstly, what about this 3.2% margin of Bouygues Building and Sealing works at the September, it did go worse than last year when you had some margin, if I remember? And tell me if I am wrong, but it looks like the current operating profit of Bouygues Building and Steelworks is down year on year as in September. Could you confirm that? This is my first question. I have a second question on Bouygues Immobilier. Do you maintain your guidance of one hundred percent one hundred basis point margin decline this year? Or do you feel it could be worse than 100 basis points? So regarding Bouygues Construction, the 3.2 is not far from our normative margin, which is 3.5%. So we are in line with our general average margin in terms of Building and Civil Works. After that, you know perfectly that according to the timing of the various projects, we could have variation from four to 3% depending on the various timing of the portfolio. And you are perfectly right. At the September 2018, we reached 4.2% in terms of Bidding and Signal margin, which is absolutely not normative. And we never we have never said that this 4.2% will be forever. So now we are at 3.2%, which is again very close from our normative margin. Again, quarter by quarter, we can move from 3% to 4% in Building and Civil Work, which is totally normal according to the nature of the portfolio of our various contracts. So we are totally in line with our normative margins for Building and Civil War this year. Regarding your second one, Bouygues Immobilier. So for sure, now we are mid November, and we are now unfortunately sure that we will not be able to reach our target, mainly because we will not have all the commercial deals we anticipated previously. We wait for some significant projects before the end of the year, but not the full deal we anticipated. The result of that will be create an improvement of the margin compared to September, but we are not in a position to reach the 6%. And we anticipate to be around 4% for the full year. Okay. So we have another question from Jerry Dellis from Jefferies. Please go ahead. Just to complete my question my answer. Nevertheless, we continue to maintain the idea that we will be able to increase the margin of the full construction activity in the Bouygues Group because of the improvement of Bouygues Construction and Colas. So there is no change on the construction guidance at all. But for sure, we will be not at 6% for Bouygues Immobilier. Morning. It's Jerry Davis here. Good morning. Sorry, sorry to interrupt you. Hi. Thanks for taking my questions. First question is related to the mobile activity. If we do drill through the mobile service revenue number into the services billed to customers, it looks like growth accelerated this quarter to about 4.5%. I suppose as we go into Q4, you start to lap against the improvement in the promotional environment that I think kicked in from Q4 of last year. Does that pose a risk to this revenue growth rate that you're delivering in on the mobile side? Second question has to do with fixed service revenues. And again, if we drill into the services actually billed to customers, it looks like service revenue growth on that sort of retail basis was up 11% in the third quarter. If we look back to the second half of last year, this same metric was growing only about 2%. So I'd like to understand, please, whether you think this acceleration in service revenue growth builds to customers is primarily a function of your higher fiber to the home penetration? Or is there also an element of you sort of raising your prices to narrow the price discount versus competitors? And then very finally, please, could you just confirm again what you regard as being the sort of normative operating margin for Colas, please? So about your second question about the fixed revenues the increase in term of work rate in the fixed revenue is mainly due to EBITDA increase, and this is coming from a less promotion and higher price. I think that we will raise our price by something like €2 in the FTTH a few months ago. Your first question was about mobile service revenues. The trend now is very good. Many users, subscribers increased our ability to maintain our ABPU. We hope that we should continue to have a good trend in terms of revenues at this time. I don't know if it could be at the same pace as today because the rate is high, but the trend should continue at good level. So regarding the normative margin, for the road activity of Colas, we remain with the same idea to be between 3.5% to 4% on the normative level. And we will be able to reach that at the group Colas group level when we will have this level 3.5% margin in Colas Rail, which is not the now because the situation is breakeven situation coming from a very big loss in 2018. So breakeven this year, an improvement in coming years. And again, at the time Colas Rail will be able to reach the 3.5%. So probably two, three years from now, we will have 3.54% for the whole Colas Group as normative level. So we have our first question next question, sorry, from Nicolas Coulissant from HSBC. Please go ahead. Mr. Nicolas Coulissant? Yes. Just a follow-up question and quick one on Colasse Canada. Revenue is down due to economic slowdown in Alberta. I wonder how we should be concerned about Canada given you risk being pushed dramatically your exposure on this country? And also, how much disruption do you get in Hong Kong from the events? Would there be delays in projects which could be attributed to your costs? Thank you. So regarding regarding Hong Kong, at this point, we have absolutely no impact on our activity. Obviously, we are closely monitoring the situation, but no delay in term of execution. Except on the weekends, there is absolutely no trouble during the working days. You have seen that the Hong Kong authorities continue to award new contracts So and big we don't anticipate big trouble for us either in term of delay, in term of execution or in term of pipeline of projects. Obviously, the situation is relatively uncomfortable, and we wait for a normalized situation in the coming months. But again, for the time being, negative impact. And it's not only a dream, it's what we are facing today. Regarding Canada, no, the in Canada, the situation is very difficult in Alberta also because of the oil price situation. The situation is not bad in Ontario, which is the most important footprint for generic asphalt. So no problem in Ontario. And again, we have these difficulties in terms of works in Canada. But for the bitumen activity, the situation remains very good because the distribution of bitumen is not only from Canada to Canada, but also from Canada to America. So as a whole, the situation is not so good as possible because of this drop in Alberta, but it's not real negative impact for the whole Canadian activity and mainly for the bitumen activity. So there is no negative impact coming from our reinforcement in Canada and the acquisition of Miller McAsphalt. No, it's Ulricha. Thank you. So we have no further questions. Okay. So there is no more question. Thank you very much for joining us today. We will be announcing full year twenty nineteen sales and earnings on 02/20/2020. So have a good day. Thank you very much. And if you have question, obviously, please contact our Investor Relations team. Have a good day. Thank you very much, all of you. Bye. Ladies and gentlemen, this concludes week nine months two thousand nineteen results conference call. Thank you all for your participation. You may now disconnect.